Out of the Closet and All Over TV

Two years ago, Patrik-Ian Polk set out to produce Noah's Arc, a takeoff on Sex and the City written from his perspective as a gay African-American living in Los Angeles. He figured the project's chances of being picked up by a TV network were slim, so he put a few clips up on the Web and took orders for DVDs he planned to burn himself.

Polk did not anticipate what has become a sudden spike in demand for shows about gays and lesbians. Viacom's MTV Networks bought Noah's Arc and plans to run it this summer as the first scripted series on its new gay channel, Logo, which will launch June 30 in some 10 million cable households on the digital-basic tier. “I had no idea it would take off and travel so far in such a short period of time,” Polk says on the Web site where he won't have to park Noah's Arc after all.

With gay-oriented programming at unprecedented levels on television—who would have been bold enough five years ago to predict that TV would soon have two popular shows with the Q-word in the title, Queer as Folk and Queer Eye for the Straight Guy?—some programmers are betting that the time is ripe for channels specifically targeting gay audiences.

Logo, the product of three years of internal discussions at Viacom, will be the first advertiser-supported network targeting gays, lesbians, bisexuals and transgenders. It joins another gay-television distributor, the closely held pay service Here!, which is available on cable and satellite and says it can be seen in 25 million homes.

The big question is whether these two networks can offer programming entertaining and informative enough to draw the sort of sizeable audiences that would encourage skeptical satellite and cable operators to keep dedicating precious bandwidth to gay-targeted content. Logo bears the added burden of trying to please advertisers, while Here! faces the challenge of retaining customers with a pay model that even HBO labors to make succeed.

“It's long overdue from a community's perspective. But from an advertising and marketing perspective, it's probably coming at the right time,” says Mark Wilson, a VP with Prime Access, an advertising agency that has helped AT&T, Ford and other Fortune 500 companies develop strategies for targeting gay and lesbian consumers. “There's now a critical mass of advertisers who are looking at this market who recognize the viability of it.”

Many companies still shy away from including gay couples and families in national advertising campaigns, although including other minority populations—blacks, Hispanics, Asians—has become fairly common. Marketers are more comfortable targeting gays through ads in community newspapers, national publications such as Out magazine, and Web sites like gay.com.

Twenty years ago, some companies pulled ads from an NBC movie about AIDS, An Early Frost, in response to pressure from conservative groups. Fast-forward to 2005: MTV expects advertisers to embrace Logo as they try to deepen their relationship with gays and lesbians, a group that market-research firm Harris Interactive/Witeck-Combs estimates had some $585 billion in disposable income last year. Half a trillion dollars in buying power gets the attention of businesses searching for untapped markets.

That is where niche channels like Logo come in, says network President Brian Graden, who is also president of entertainment for MTV Networks Music Group. “Entertainment is still really owned by television. It's for the mass audience and also for the target audiences.”

He declines to discuss how Logo's ad sales are going or discuss what financial arrangements MTV is making with cable companies and satellite operators that agree to carry the channel.

The only specifics announced to date are that Subaru, Paramount Pictures and Internet travel agent Orbitz.com are Logo's three “premier” sponsors—a classification that means they signed on first and qualify for early-bid advertising discounts. The network also says it has signed ad deals with companies in financial services, fashion and the travel industry, although it declines to identify them.

Subaru is a pioneer in gay marketing. The company started aggressively courting gay consumers in the mid 1990s, when the automaker's marketing research indicated that gays—in addition to teachers, skiers, engineers and health-care professionals—were particularly receptive to the company's new policy of offering all-wheel drive on every Subaru vehicle, according to Tim Bennett, director of advertising for Subaru of America Inc.

Having decided to target gay consumers a decade ago, Subaru was a natural sponsor for Logo programming. But Bennett doesn't expect many other automakers to “be brave enough” to advertise on Logo, at least until it has a track record with audiences.

Given that advertisers relentlessly slice and dice demographics in an effort to find consumer characteristics they can appeal to with targeted commercials, it's not surprising that some advertisers think tailoring their messages according to sexual identity will pay off. After all, a fortune has been spent on ads specifically appealing to the sexuality of straight consumers (hundreds of millions from the beer industry alone). Now companies are just expanding the strategy to court groups with other sexual orientations.

“The worst thing you can do is to be irrelevant,” says Wilson, whose firm advised AT&T in 1994 on its first major direct-mail campaign targeted at gays. “You can be entertaining and on message, but if you're not relevant, you're not going to get noticed.”

Groups that have long been ignored by advertisers are more likely to respond to targeted campaigns because they have the added weight of making those people feel valued by the automaker, vodka distributor or underwear manufacturer that is taking the time to speak to them. Large numbers of gay consumers have long had an affinity for brands like Absolut and Calvin Klein, in addition to Subaru, which were among the first to target that community.

The Here! network has sidestepped the entire matter of advertising support, deciding to market its films, documentaries and TV series directly to viewers. Cable and satellite operators make a commission every time one of their customers orders a Here! program or signs up for a monthly viewing plan. It can be a lucrative arrangement for the operators: Typically, they receive 70¢-90¢ on the dollar for VOD orders that don't involve major Hollywood movies.

Here! CEO Paul Colichman says his service is gaining critical mass and should be available in 30 million cable and satellite homes by year's end. The channel is one of only a handful of startup programmers that have focused on building out video-on-demand (VOD) and subscription video-on-demand (SVOD) services at their launch, figuring that cable operators would be attracted to a format that many experts believe could be the future of pay TV. Here! also offers a traditional “linear-channel” service that's available on DirecTV, which doesn't yet offer VOD, and some cable systems.

“It's not about gay or not gay,” says Colichman. “It's that cable systems don't want any more linear channels.”

The foray into cable and satellite is one of many ventures by Here!, which Colichman wants to build into a large media company focused on gay content. Colichman, who owns a stake in Here! and is personally involved in the production of all its original content, won't identify the company's key shareholders or the amounts they have invested. He does say that Here! has spent more than $50 million developing exclusive content. (See box on page 27.)

Also bidding to join the race to attract gay viewers: Q Television, a tiny publicly held company whose shares are trading for less than a penny. The service is available only on RCN Cable systems, which combined have only about 400,000 subscribers. The channel will not become a credible competitor until it gets its finances in order and is able to persuade a major cable company or satellite operator to pick up its service.

The difficulty of that task would seem to have more to do with Q's stability than with operators' resistance to courting a gay audience. In Southern California, for instance, Adelphia cable has long been a sponsor of such events as fundraisers by AIDS groups, a Gay Life Expo Pride and West Hollywood Pride. The outreach is similar to other efforts that Adelphia makes to connect with the area's large Hispanic and Korean communities.

“We absolutely live in a melting pot,” says Adelphia Regional Sales and Marketing VP Mariann Belmonte. “It's a patchwork quilt of many different groups. We recognize the differences.” Those differences sometimes lead to complaints. “There's always concern when we add ethnic programming. We have customers saying, 'There's all these channels, but I can't understand them,'” she says. “If you put Logo in that container, I'm sure that some folks will feel that way, too.”

Others, of course, likely will feel that a long arc that began in 1971 when All in the Family dared to broach the subject of homosexuality has finally reached some sort of completion.